Ask the Expert: What staff considerations are there with a divestiture?Ask the Expert: What staff considerations are there with a divestiture?

Q. How much of a lead time should you give human capital considerations when managing a change of ownership through divesture and the like?

An absolute minimum of two months is recommended as many legal processes will include a 30 day consultation or notice period for the worker to evaluate potential new employment before deciding whether or not to accept it.

Also recreating like for like employment scenarios is very challenging, especially where the new or separated entity is not as large as the body it separated from, as benefits and provisions such as pension schemes might not be as easy to procure.

If the new company doesn’t have legal entities in each country for employees to transfer to, more time should be allowed, as this then involves understanding the ramifications of transferring to a third party employment agent. This can also affect how the existing employment scenario is ended and could have consequences for the selling party.

It is also highly recommended that a Transition Support Agreement (TSA) is arranged with the selling entity – often the complexities around payroll and HR processes may be being followed per the selling entity’s standards.

However the new company may not have the level of knowledge available internally to support certain scenarios on day one. So having three to six months of support from the selling entity will ensure you do not get left ‘on your own’ recreating new processes, policies or standards from scratch.

Are there any ‘rules of thumb’ or general considerations that are consistent globally when managing the transfer of employees’ ownership?

Yes. Essentially a good rule to follow is that the employees cannot be adversely affected by the transfer. So if they have excellent and high quality health insurance that will need to be matched or continued under the new ownership. Some countries are more complex than others with regards to the laws they have governing transfer of employment transfer, but if you work towards this high level of understanding then you are less likely to make a major mistake.

Q. How much of a lead time should you give human capital considerations when managing a change of ownership through divesture and the like?

An absolute minimum of two months is recommended as many legal processes will include a 30 day consultation or notice period for the worker to evaluate potential new employment before deciding whether or not to accept it.

Also recreating like for like employment scenarios is very challenging, especially where the new or separated entity is not as large as the body it separated from, as benefits and provisions such as pension schemes might not be as easy to procure.

If the new company doesn’t have legal entities in each country for employees to transfer to, more time should be allowed, as this then involves understanding the ramifications of transferring to a third party employment agent. This can also affect how the existing employment scenario is ended and could have consequences for the selling party.

It is also highly recommended that a Transition Support Agreement (TSA) is arranged with the selling entity – often the complexities around payroll and HR processes may be being followed per the selling entity’s standards.

However the new company may not have the level of knowledge available internally to support certain scenarios on day one. So having three to six months of support from the selling entity will ensure you do not get left ‘on your own’ recreating new processes, policies or standards from scratch.

Are there any ‘rules of thumb’ or general considerations that are consistent globally when managing the transfer of employees’ ownership?

Yes. Essentially a good rule to follow is that the employees cannot be adversely affected by the transfer. So if they have excellent and high quality health insurance that will need to be matched or continued under the new ownership. Some countries are more complex than others with regards to the laws they have governing transfer of employment transfer, but if you work towards this high level of understanding then you are less likely to make a major mistake.